Macro Insights Weekly - Rate cuts? Not so fast

2023 ended with global markets in euphoria over ikely near-term rate cuts in the US, with both the fixed income and equity markets rallying. We think the market is getting ahead of itself.
Granted, without Fed easing, real short-term rates would rise in 1H24 as inflation eases further.
But long-term real rates are already at a 5-month low, thanks to recent market rally.
Equity markets have rallied robustly, adding up to an overall easing of financial conditions.
Meanwhile, real economic activities and hiring data remain strong.
Given this dynamic, we think Fed officials would wait till mid-year before easing.